Chinese Bank Issues the First Asset-Backed Commercial Paper in China on Blockchain

China Zheshang Bank, based in Zhejiang province has leveraged blockchain technology to issue the country’s first asset-backed commercial paper in the Chinese financial market. 

China Zheshang Bank successfully issued the “Lianxin 2020 Lianjie First Phase Asset-backed Commercial Paper,” which was worth 120 billion yuan ($16.93 billion). 

The asset-backed commercial paper (ABCP) was issued as a part of the National Association of Financial Market Institutional Investors’ (NAFMII) pilot project. ABCPs are short-term investments issued by financial institutions to support companies in their short-term goals.

The ABCP used an innovative design that combined blockchain technology with asset securitization to provide a “greater number of upstream and downstream small and medium-sized enterprises (SMEs) with a direct channel to markets,” according to China Zheshang Bank. This design would further increase the accessibility of business financing. 

The Chinese bank used blockchain technology as the basis for its accounts receivable financing platform, which supported 4000 of the bank’s enterprise clients to issue over 100,000 in “blockchain receivables.”

China grants banks extra funding to help SMEs

Beijing is helping Chinese SMEs to recover from the economic aftermath of the coronavirus pandemic, as most businesses in the country had to remain shut.

As the risk of a sharp increase in unemployment could pose risks to social stability, the State Council announced that they would grant banks another 500 billion yuan ($71.1 billion) on top of the 300 billion yuan in funds released by the government in early February. 

According to China Zheshang Bank, the launch of the Lianxin ABCP will ensure that SMEs can seek financial support easily, and will increase the accessibility of financing for SMEs “that have difficulty with financing via direct debt issuance.”

Chinese central bank official urges the digi-acceleration of the economy

Fan Yifei, the PBoC’s deputy governor echoed President Xi Jinping’s call for the acceleration of the country’s blockchain development adoption. The president pointed out that it is necessary to strengthen fundamental research of blockchain technology and enhance innovation, enabling China to take a leading position in the blockchain field.

The bank’s deputy governor met with the central bank’s officials as well as the heads of their affiliated financial institutions. Fan emphasized the importance of blockchain and financial technology (FinTech) industries and wanted to ensure China’s adoption plan would be laid out and implemented by 2021 to be in line with the deadline they have set out.

New policies were also discussed along with an overview of scientific studies to encourage the development plan, as Fan further stressed the urgency for accelerating the digitization of the Chinese economy.